20.10.2020

PROBLEMS IN DISMISSAL OF EMPLOYEES AT THE INITIATIVE OF THE EMPLOYER FOR COMPENSATION

Separation from an employee, for whatever reason, is often a challenge for employers. The legal framework of labor relations in Bulgaria is conservative, outdated, relevant to other social systems and ultimately insufficiently flexible to adequately protect the interests of both parties in the employment relationship.

One of the most preferred grounds for termination of employment is downsizing and reducing the volume of work.

Employers often do not realize that the termination of employment on any of these grounds is a procedure that requires consistent and precise preparation of the accompanying internal documentation, including methodology for selection, appointment of a selection committee and others. The lack of any of the necessary elements of the procedure makes it easy to attack by the employee with the resulting negative consequences. Of course, the Labor Code provides a number of other grounds for termination of employment, but they cannot be covered by this brief.

In 2001, the legislator introduced a new possibility for termination of employment at the initiative of the employer - for compensation. Although associated with a financial cost to the employer, this option has become one of the preferred grounds for termination, as it provides a quick, efficient and stable, from the point of view of possible litigation, way to finally settle the relationship with the employee.

In general, the law allows the employer, on its own initiative, to offer the employee termination of the employment contract against compensation provided for in Article 331 of the Labor Code. The proposal must be accepted in writing by the employee within 7 days. Otherwise, it is considered rejected. Although there is no explicit requirement in the law, we believe that the proposal to the employee should also be in writing, and its service on the person should be duly certified, in order to avoid future disputes over compliance with the statutory 7-day period. The compensation must be paid to the employee within one month from the date of termination of the employment contract. If the employer does not comply with this deadline, the grounds for termination shall be deemed to have lapsed. The minimum amount of compensation is four times the amount of the last received monthly gross remuneration. Of course, the parties can agree on a higher amount, but not a lower one.

At first glance, the regulation is clear, unambiguous and does not imply the emergence of controversial points.

In fact, considerable attention should be paid to the concept of gross remuneration, which is the basis for calculating the compensation due. This is a particularly important issue in sectors in which the element "bonus" or "reward" participates in the formation of the monthly remuneration of employees. More and more industries include a fixed and flexible part in the negotiation of remuneration, as the most common "flexible part" includes the bonus element in the formation of wages, and it is most often associated with achieving certain results. In most cases, this additional remuneration is many times higher than the basic one and plays a decisive role in the final amount that the employee receives.

However, is the bonus included in gross remuneration, which is the basis for calculating the compensation due, discussed above?

The Ordinance on the structure and organization of the salary stipulates that the gross remuneration includes the basic remuneration and the additional remunerations of a permanent nature, determined by the individual employment contract, unless otherwise provided in the Labor Code. Therefore, in gross remuneration as a basis for the compensation under Art. 331 of the Labor Code includes the basic remuneration and additional remunerations of a permanent nature, those that are predictable and secure, defined in a collective employment contract and/or in the individual employment contract.

The regulation stipulates that additional remunerations of a permanent nature are those that are paid for a scientific and educational degree, for acquired work experience and professional experience, as well as those that are paid permanently and together with the remuneration due for the respective period and are in dependence only on the time worked.

In order not to be considered as additional wages of a permanent nature, i.e. for an element of gross remuneration, the amounts for bonuses (rewards) should be determined by the employer (by decision of the management), should depend on the achievement of a certain work result, should not be predictable, should not be secure, should not be permanent and should not be are bound only by the time worked.

Therefore, it is important that the rules for the formation of bonuses and rewards in the company be prepared in a way that does not allow them to be interpreted as part of gross remuneration, which would lead to a multiple increase in the minimum benefit for termination of employment at the initiative of employer.

For completeness, we should note that the insurance income of the person is also irrelevant. I.e. regardless of the fact that the employee is insured for the full amount of the received remuneration (including a bonus), this circumstance does not make the bonus part of gross remuneration. This is so because the basis on which the amount of compensation under Art. 331, para 2 of the Labor Code is not the insurance income, but the last received gross remuneration, in which (as indicated) should be included only the basic salary and the additional labor remunerations of permanent character.